Department of Labor filed a lawsuit May 5 in a U.S. District Court in...

Department of Labor filed a lawsuit May 5 in a U.S. District Court in Maryland charging National Electrical Benefit Fund trustee John Grau and former trustee Jack F. Moore with imprudently lending more than $6 million in pension assets, and with an imprudent purchase of shares in a limited partnership in the early 1990s. The Washington-based NEBF has approximately $8.3 billion in assets. The lawsuit asks the trustees to reimburse the fund for any losses, including interest, resulting from a loan to Columbia Land and Development to acquire and develop land in Orlando, Fla. Columbia is owned by Terence R. McAuliffe, President Clinton’s top fund-raiser in the 1996 campaign, and his wife, Dorothy S. McAuliffe. The regulator’s lawsuit charges the trustees should have known the loan could not be repaid in full with interest. The loan had been in default from December 1992 to October 1997. The McAuliffes also own American Capitol Management, a partner with the fund in a separate investment known as American Capitol Group I Assets LP, which guaranteed payments of the Columbia loan. The lawsuit also charges the trustees imprudently purchased interests totaling $2.45 million in the limited partnership, which reduced the valued of the ACM guarantee on the Columbia loan. Moreover, the lawsuit alleges the trustees made one of the purchases in the ACM partnership even though the Columbia loan was in default. The pension fund subsequently sold its share of the partnership and the Columbia loan to ACM at a loss. But the NEBF is disputing the lawsuit. In a statement, fund officials noted "the investments in question were approved by the trustees after a thorough review and recommendation by outside real estate experts. The ‘losses’ cited (by the Labor Department) exist only in the Department’s imagination based upon their ‘notion’ of what the investments should have earned.’’ In fact, the investments outperformed the NCREIF real estate index, returning more than $14 million to the NEBF plan participants, the statement said.